What should a Sales Manager do when sales are down?

What do most of them do?

Act macho cowboys. Threaten. Push. Lets go a for a beer. Motivate? More like a painful three hours for the subordinate. Utility of any of these things? The beer session is always paid for by the company. Does the employee benefit? Do sales improve?

Doubtful. Why?

Because none of these techniques address the fundamental root cause, they only address the symptoms.

Why are sales down?

Because the market is down.

Because customer does not have budgets.

Because bosses did not give discounts

Because ....... Because...... because..........

And a whole lot of silly excuses given by most salespeople.

Why are sales down?

Because there are fundamental productivity issues with the sales team. Which no amount of screaming or threatening or beer can address.

They are poor in knowledge of the product.

They are poor in knowledge of industry.

They have poor ability to generate leads, they depend on marketing to do so.

They are poor in the Sales KYC process - ability to understand and probe for real customer needs.

They cannot make a professional presentation about their company's products.

They cannot handle objections from the customer.

They are scared of closing the deal.

And the beginning has to be made in the Sales review being oriented towards finding out which of these root causes exist in which sales people? How?

The solution lies in establishing clear cut process measures. Lets take an example:

Sales Result Efficiency:

Consists of the following three parameters:

a. Total Sales value sold.

b. No of units sold.

c. Average Sales Realization per unit.

Lets take a specific example. Say a auto company sets the following targets for each of its sales people:

Rs 100 Lakhs in Sales to come from 20 cars at an average price of Rs 5 Lakhs each.

The actual performance of one of the salespeople is as follows:

Rs 86 Lakhs in sales from 10 cars at an average price of Rs 8.6 Lakhs. How would you measure the efficiency of this sales person:

1. Sales Value = 86 / 100 = 86%.

2. Cars sold = 10/20 = 50%

3. Value = 8.6/5 = 172%

Sales Result Efficiency = Multiply the three percentages 86% * 50% * 172% = 74%

Most companies only measure the first figure, which is misleading. The combination with the other two figures results in a much more accurate figure of Sales Results Efficiency which is a focus on:

a. Range Selling - selling the full range of the company's products, not just .

b. Sales Value - Ensuring focus on EBITDA.

Tracking Sales Result efficiency is the starting point for a sales manager to figure out what areas of improvement his team needs to work on.

How many companies do you you know where the Sales team has taken incentives and the company has made losses? That's where you would implement such a system immediately.

.............watch out for the Sales process efficiency description in the next article in this series. These ideas were discussed in a recent training intervention we did for a large client recently.

Leadership Lessons from Nissan - Book Review - Turnaround at Nissan - How Carlos Ghosn transformed the company

Turn Around - How Carlos Ghosn rescued Nissan. When Carlos Ghosn took over as COO of Nissan in April 99, this was the state of Nissan. 25 years of declining market share, 22 bn $ of debt, 140,000 demotivated people, ordinary cars.

Carlos Ghosn within three months of taking over, announced a NRP - Nissan Revival Plan as follows: Within three years by April 2002, Nisan would achieve the following:

a. Net debt of $ 10bn or less (cuurrent figure $ 22bn)

b Operating margins 4.5 % or more (currently negative)

Guess what was the actual performance?

Net debt $ 10 bn. operating margin of 7.9%.

And this was achieved within two years against a target of three. He also laid off 21,000 people and shut down four plants. And he achieved all this in a Japanese company, that too.

Here is how it was done:

a. Forming CCTs - Cross cultural and cross functional teams. No culture is good or bad, there is something to be learnt from every culture. This is not the case of a French company Renault taking over a struggling Japanese company Nissan. The best way is to take the best of French culture (analytical skills and terrific focus on product) and marry it with the best of Japanese culture (superb manufacturing processes). Cross functional teams were formed across locations to address key issues facing the company. Initially the Frenchmen did not even speak the Japanese language and vice versa. They were given two months to come out with specific recommendations to look at issues facing the company. Later this deadline was extended by one more month. And these teams were formed even before the merger was announced.

b. Solutions comes from employees at all levels. Ideas do not just come from leaders at the top. They come from employees at all levels. Ghosn spend the first few weeks of his tenure at Nissan travelling all over the world meeting employees, dealers, visiting plants, etc. He heard his people and they told him what was wrong with the company and what was needed to fix it. The Nissan Revival Plan was based on the inputs he received from Young Leaders at all levels in the company.

c. Personal commitment - If Nissan does not achieve these numbers, then me and the entire Executive Committee will go fishing. Most leaders do not take accountability. Ghosn announced to the media - "if we do not achieve these targets, the entire leadership team will resign". This sent a strong message to the world and to senior leaders within the company - I am serious. Failure is not an option, you better achieve these numbers, else you got to go.

d. 5% planning and 95% execution. Shut up and execute. Most leaders talk too much, do too little. Nissan used to make lots of plans and keep discussing these plans over and over again. Eventually the market circumstances used to change, forcing the plans to be redone all over again. Ghosn came out with a rule. Spend 5% of your time planning, 95% of the time executing.

e. Change people with logic and data, not threats. It is no big deal to fire people. But when we fire people, we in a way admit to two things. a - that we did a lousy job of hiring them and b - we did a lousy job in training and growing them. Ghosn's assumption - people are intelligent and reasonable. Convince them with logic. Use data, use the power of argument, never threaten with rank. That is more challenging and satisfying.

g. Earn market share, sell products profitably or do not sell at all. This would be a radical idea for most salespeople out there. Ghosn used the concept of "earning market share" to indicate that the market has to give us the right to sell our products at a profitable price. If we are not able to do so, then we need to earn that right - by improving our products, by building better cars, by running our company better. He never used to ask the question "how many cars do you sell?". "His question was always "are we selling cars profitably?"

Carlos Ghosn next target - Nissan 180. Sell one million more cars at 8% operating profit and achieve zero net automotive debt in the next three years. Yo!!!

..................Ideas from the book Turnaround - How Carlos Ghosn transformed Nissan

Never sell just a product or a service, always bundle and sell a solution.

Why? Because products can be compared very easily, solutions cannot be. eg if I sell a mobile phone or a computer by itself, it can be compared to other competitors easily. But I put in an element of home service, warranty, replacement etc and hey it is suddenly difficult to compare it to others.

So what are the advantages of solutions selling:

a. Difficult to compare services, easier to compare products.

b. Customer loyalty increases as adding a service component ensures that the service provider understand the needs of the customer better. This increases switching costs for the customer and increases customer loyalty.

c. Larger revenues: Adding services and selling solutions usually involves selling multiple products. This increases the ticket size of the sale, and though it increases the selling cycle, the overall impact of sales productivity is higher.

d. Lower attrition of Sales team: Solutions selling is more challenging than selling boxes. The sales team learns more and finds the job more challenging as there is learning happening. Take the following example.

What can a solution do for a client company:

a. Reduce costs.

b. Do something better.

c. Reduce time taken to do a process.

Lets take just one example of reducing costs for a client. Any outsourcing of a process can have the following impact on costs saved:

a. Acquisition costs: price, prepurchase evaluation, shopping time, paperwork, mistakes in orders, travel costs.

b. Possession costs: interest, taxes, insurance, storage, installation, handling, quality control, obsolescence.

c. Usage costs: Downtime, labour, training, replacement, disposal, etc

A good salesperson would do his research and actually quantify the precise value of each of the above cost heads and the quantum of savings that he can bring about for his customer.

This whole process results in terrific learning and growth for the salesperson and is actually a very effective retention tool.

...........based on ideas discussed in a training workshop for a large b to b sales company.

How do we ensure that salespeople spend more time to understand the customer better and less time talking about the product?

What do most salespeople do? Start the call, introduce themselves and after a few admin questions like address and mobile number, straightaway launch into the product that they are selling. Hardly any probing happens, no understanding of customer needs, no relationship building at all. At a recent sales training for a real estate salesforce, the challenge we faced was how to ensure that the probing and understanding of customer needs is done by the frontline FOS (feet on street). The Relationship Managers who are employees of the company understood the need well, but the challenge was to ensure that the FOS practices the concept in the field.

How did we ensure this? The sales process was broken into five sub - processes:

a. Research sub process.

b. Lead generation.

c. KYC process.

d. Presentation process.

e. Follow up process.

For each of these sub processes a specific set oof activities was proposed and a set of measures put in place to ensure the process was followed. This was done as follows:

a. For the Research process, the understanding was that when we sell a flat to a potential buyer, it is not just important to know the details of the property i.e. carpet area, location, fittings, etc but also since a flat is actually a home and an extension of a lifestyle, it is important to know other details like:

a. schools: the mother would have an opinion of which school she wants to send her children to.

b. sports facilities: son plays football, daughter plays tennis.

c. hospitals: aged grandparents may need to be taken here in case of emergency.

d. restaurants, malls and cinema complexes: the family has these options for entertainment.

and many many more details.

And how do we ensure that the sales team actually possesses this information:

a. different members of the team are collecting this information.

b. a test would be conducted for each FOS and he has to pass this test.

..............ideas discussed in a recent sales training workshop for a large brokerage house that has diversified into real estate.

Outstanding motivational clip - A video that would change your life

Preparing for a Negotiation means having Three clear positions, not one or two

Most of us go into a negotiation with no clear idea of what we want from the negotiation. Good negotiators go prepared with two positions - an ideal position and a starting position that is somewhat higher than the ideal position. eg a sales person working for a large IT services company may want to sell a laptop AMC package for ideally Rs 2000 but may start with Rs 2200 as a starting position.

There has got to be however a third position called a "walk away" position.

What is the walk away position? It is the position below which you will "walk away" from the negotiation, meaning below this point, you would not be interested in doing business. eg a "walk away" position in the laptop eg may be Rs 1700. Why is this important? Most salespeople are inexperienced, the buyers however are quite experienced. The buyer quotes a figure which is 50% lower than the first quote of the seller. Sellers in most cases are desperate to get the deal, they tend to have poor pipelines and are intimidated by the whole sales situation. They tend to get more and more emotionally involved in the negotiation process and ultimately end up giving away too much

Having three positions has the following benefits:

a. It ensures the organization protects its bottomline.

b. It ensures the sales team knows when to stop wasting time with the customer.

c. It ensures a logical discussion without the sales team losing control of their emotions and getting desperate.

............based on ideas discussed in our negotiations training programs

Hire more supervisors, keep job descriptions vague - Leadership Lessons from Southwest Airlines

Southwest Airlines. 37 years old airline. $ 10 billion in revenue. 37 consecutive years of profitability. Over 500 aircraft.

Check out these concepts they follow:

a. Increase the number of supervisors: That's right, you heard that right. When people all around are downsizing the number of managers, Southwest has actually increased the number of managers. Why? Because they say when managers are less, they only end up doing exception management, that is fire-fighting. When there are enough managers, they are then able to coach frontliners better leading to improved productivity of assets. The better productivity more than makes up for the extra personnel cost. Eg Southwest has the lowest turnaround time in the airline industry 20 mins. Faster turnaround means more time in the air, therefore higher revenues per aircraft.

b. Hire for Relationship building ability: Most companies hire on job skills or experience. Southwest also looks for "ability to build relationships". Detailed questions are asked on this subject and track records are checked during hiring. Focus is on looking for proof of having worked well with others and demonstrated evidence of "relational competence"

c. Have flexible job descriptions: Most companies specify very narrow and specific job descriptions. Southwest has job descriptions and also adds "and whatever else you need to do to enhance overall operation". This keeps job flexible at the boundaries and ensures people work with each other instead of blaming especially when things go wrong. The entire focus is on ensuring plane turnarounds are quick.

Intersted in more? Read "The Southwest Airlines Way" by Jody Hoffer Gottell

Leadership Lessons from Google

Google's founders Sergey Brin and Larry Page have created a phenomenally successfull company that is the greatest media and internet sensation of our time. Of course they did a lot of things right, below are mentioned some things that stand out:

a. They focussed on creating a superb product: Management schools talk about advertising, these guys had one overriding passion. To create the best search engine in the world. Focus on doing that and they figured the rest would take care of itself. For many months, the Google founders had no clue how their search engine was going to make money, they actually had no clue how to monetize it. These guys were so passionate about creating a better search engine, that was the key. Completely different from the rest of the crowd which creates a mediocre product but then soends tons of money trying to promote it.

b. No advertising: This is one company that has never done any advertising. It initially attracted and continues to attract lakhs and millions of users purely bacause its search engine is the best.

c. Home page - no clutter: Every other website has a highly cluttered home page. That has two dangerous consequences - a - the page takes way too long to load and b - what you actually want you have to search for - which takes time. And time is what a web surfer does not have, The Google home page has no ads. Salute to that

d. A business has to solve real problems: Andy Bechtolschiem, one of the early investors in Google, said "Build something of value and deliver a service compelling enough that people would just use it. That's exactly what Google does - the primary motivation - "an abiding excitement about helping people find more relevant information online, and faster".

e. Have a value proposition that attracts the best employees: And how did they do that. The value proposition to future employees - "millions of people across the world will use and appreciate your software". The investors say about the founders - "they had a great sense of purpose, which is a prerequisite for anybody nutty enough to want to start his own company - says Micheal Moritz of Sequioa Capital. "That burning sense of conviction is what you need to overcome the inevitable obstacles" John Doerr of Kleiner Perkins.

Interested in knowoing more? Read the book. Outstanding work. Google by David Vise. Buy it now.

Superb article for all those who are facing competition from low cost rivals by Professor Nirmalya Kumar from London Business School

Superb article for all those who are facing competition from low cost rivals by Professor Nirmalya Kumar from London Business School. also read the book "Marketing as Strategy" by Harvard Business School press

http://www.facebook.com/l.php?u=http%3A%2F%2Fwww.kdischool.ac.kr%2FUserFiles%2FFile%2F2009%2520Spring%2FMarketing%2520Management%2FStrategies%2520to%2520fight%2520low%2520cost%2520rivals-1.pdf&h=99715

What is the guarantee that my customer will give volumes in the future, if I give him discounts today?

There is no guarantee!!!

We have actually received promises of huge "volumes" of training programs in the future from clients whose bio datas were floating around on job portals. Two weeks later they have put in their resignations and we have felt like fools. By then the discount had already been given

There is a way however. Offer the discount on a staggered basis as and when the volumes actually materialise.

One of our financial services clients gave us this idea. It was a superb example of negotiating with the right amount of maturity and transparency between both parties. Our client was not sure about the volumes he could offer to us. And the relationship was strong. So he suggested a staggered pricing model as follows:

5 units per month - Rs 100 (eg)

6-10 units per month - 10% discount.

10-15 units per month - 25% discount.

Review to be done every six months and the excess payments adjusted through discounts in the next bill.

Brilliant right?

Try it out.

............idea suggested by our very good friend from a financial services company.

How to give discounts without making a complete fool of yourself.

This note is for all the MBAs out there. What are you actually looking for? - a better way to give discounts. Forgotten Kotler - first year MBA. What happens to the brand when we start giving discounts?

And in sales - you are the brand!!!.

Lets discuss a technique to offer discounts which sends the right message to the customer.

Before that, how does the conversation usually happen?

Sales person goes to customer, makes a pitch. Offers a price of Rs 100. Customer responds with Rs 50. Sales person walks out in 5 minutes, comes back into the office and then negotiates for two hours with his bosses.

If only he had the courage to negotiate two hours with the customer!!.

He reverts with a price of Rs. 95. Customer starts laughing. More fun happens. After a few hours or a couple of days, salesman offers a price of Rs 80. Customer issues an ultimatum. Rs 50 by the end of today else I am going with your competitor. The sales guy panics. His boss also panics. The panic travels upwards in the heirarchy till the VP sales also panics. The discoiunt is approved. Customer gets the price of Rs 50. Entire sales team makes their jackpots and super jackpots and incentives.

What is the impression on the customer?

He negotiated a bit. Price dropped from Rs 100 to Rs 95 - dropped by Rs 5.

He negotiated a bit more, price dropped to Rs 80 - this time the drop is Rs 15, it is bigger!!.

He negotiated more, got aggressive - and what happened? The price dropped to Rs 50. This time the drop is Rs 30, the biggest ever!!!

The salesperson has actually given increasing discounts. What message has he inadvertently communicated to the customer?

yes - the tiger has tasted blood.

So what is the right way to do this?

a. Decide a walk - away price: Most sales forces we work with have no concept of this, some do. A walk away price is the absolute lowest price that you will accept, below which you would not be interested in doing business. eg Rs 50 in the above case.

b. Plan on giving "reducing discounts" in stages. Rs 100. Rs 75. Rs 60. Rs 53. Then close at Rs 50. What is the size of each discount? The first discount was Rs 25. The next one was Rs 15, then Rs 7 and the last one was Rs 3.

What is the impression communicated when the discounts go down to Rs 7 and Rs 3?

That no further scope exists to negotiate.

Time to close.

Of course, the best strategy to negotiate is to position yourself in such a manner that the other party does not dare negotiate.

............idea drawn from purchase - vendor negotiations at a large SUV manufacturer based in Mumbai